how to calculate the maintenance margin for day trade

[be1314]

Hello I am new to stock. please help.
I find out that I can buy 4 times the equity for day trade. I want to know how to calculate the maintenance margin.

let say I have 25k in the account. I bought 1000 XYZ @ $100 per share. which is 100K.
how do I calculate the maintenance margin?

 

[Rhody Trader]

Maintenance margin only applies to positions carried beyond the first day. If you're day trading there is no maintenance margin. In fact, if you carry your positions overnight you will only be able to leverage 2:1.

 

[be1314]

Thank you! I got it.
I have an other question, Does margin call exist for day trade? If it exists, by how much I have to liquidate when I get a margin call.

 

[N Rothschild]

ussualy all of it

 

[Rhody Trader]

Thank you! I got it.
I have an other question, Does margin call exist for day trade? If it exists, by how much I have to liquidate when I get a margin call.

It absolutely does exist, though in some cases and places it's an automatic close out by your broker and in others it's up to you to do the closing. If you get a call you will have to close out sufficient of your position(s) to bring your account equity back in line with the margin requirement.

 

[be1314]

It absolutely does exist, though in some cases and places it's an automatic close out by your broker and in others it's up to you to do the closing. If you get a call you will have to close out sufficient of your position(s) to bring your account equity back in line with the margin requirement.

OK. The margin requirement for This case ($25k in the account. bought 1000 XYZ @ $100 per share ) is $100000 * 30% =30000 ? Is this correct? I will get a call when the stock declines to $30 per share? I don't know. Is this right?

 

[Rhody Trader]

OK. The margin requirement for This case ($25k in the account. bought 1000 XYZ @ $100 per share ) is $100000 * 30% =30000 ? Is this correct? I will get a call when the stock declines to $30 per share? I don't know. Is this right?

I'm not a stock day trader, so if I get the specifics of the margin call % wrong here I'll ask that one of them chimes in to correct me.

Generally speaking margin calls come when your equity drops by half from the initial margin requirement. In this case, you're initial equity (and margin) is $25,000. That means when your equity drops to $12,500 you'll get the call. That would mean a price drop of $12.50 using the 1000 share trade, or a trading price of $87.50.

 

[be1314]

Thank you so much Rhody! You are very helpful! Happy New Year!